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This destroys the entire economy, making startups and corporations much harder to run to the point of impossibility. Even in countries run on Sharia law, they s

This destroys the entire economy, making startups and corporations much harder to run to the point of impossibility. Even in countries run on Sharia law, they still find proxies for interest

ticviking 4y ago
Those proxies tend to make the risk and liability much much clearer than usury does. And generally speaking you can’t honestly use those proxies to build financial skyhooks
- brutusborn 4y ago
  Whats a "financial skyhook"?
  - richk449 4y ago
    And where do I get one?
njarboe 4y ago
VCs generally fund startups by giving them funds in exchange for equity, not loans (complicated financial shenanigans aside).
- FormerBandmate 4y ago
  They use discounted cash flows to model them, which are dependent on loans as a key component. VCs also use loans themselves from time to time, and their investors can use loans to invest in them.
  - jongjong 4y ago
    Loans by modern banks rely on the issuance of new currency; it's a scheme which relies on diluting the value of citizens' existing currency. It's unethical; it's stealing from the many to enrich the few who will receive the credit once it's spent into the economy (going into friends' businesses). Kind of like how Carl Icahn sat on the Hertz board, made Hertz take out a huge loan, used the credit to award a huge contract to one of his other businesses and then let Hertz go bankrupt. Citizens footed some of the bill by having their savings and salaries diluted (since Carl kept the proceeds of the loan and spent it into the economy; contributing towards inflation) and of course Hertz shareholders footed most of the bill. It's just theft.
    - sanderjd 4y ago
      This is so misguided. Just raising interest rates by a few points has resulted in many thousands of people losing their livelihoods in under a year, because companies could no longer justify taking out loans. What you're suggesting is eliminating loans altogether. This is a fun dorm room thought experiment, but it's not even hyperbolic to say that if it were actually pursued, it would result in a huge number of deaths by starvation.
      - brutusborn 4y ago
        Modern Islamic countries without usury manage to feed their citizens so although I would agree that banning loans would cause a lot of pain in the modern economy, I can't see how it would cause mass starvation.
        jongjong 4y ago
        Exactly, and even in those cases, it only serves to enrich certain people who intermediate the loans and to satiate reckless or impatient consumers. It's more like gambling; it appeals to and takes advantage of human nature but doesn't benefit the individual; it only benefits the house. It doesn't actually provide any true value to society.
        sanderjd 4y ago
        This is nonsense. We're rich. Broadly.
        brutusborn 4y ago
        I disagree, loans can benefit both parties if they are well regulated. In these cases loans provide a lot of value for society. Reckless loans are a symptom of an under regulated system (or in the case of the GFC, a combination of under regulation and no effective enforcement).
        sanderjd 4y ago
        Your "countries with Sharia law are good" argument might not be as compelling to me as you seem to think it is... Are there any good examples of non-authoritarian non-dictatorships in this space? Edit to add: You're right, I guess, that our government would probably take over everything and narrowly dodge mass starvation with mere mass poverty, but that doesn't sound great to me either. And mass starvation isn't so far fetched either, there have been multiple such occurrences globally within the last century.
hackernewds 4y ago
curious what are these proxies? I thought under Sharia law charging interest is "illegal"
- zht 4y ago
  bank buys the house and you rent-to-own it. coincidentally the total amount of the rent is higher than what the bank bought it for. not "interest", but yea, pretty much interest
  - s1artibartfast 4y ago
    Basically identical to a mortgage where the bank has a lien on the house if you stop paying
- humanistbot 4y ago
  Different mechanisms, but the most common for financing large purchases is Murabaha, which exists in the West as rent-to-own. Islamic law allows merchants to mark-up prices, to buy low and sell high, and nothing is considered wrong with that. So after a conversation at the bank, the bank buys the desired property at market value, marks up the price in a way that just so happens to be the prevailing interest rate (some literally use LIBOR+X), and lets the clients pay over time. The mark-up is not called interest, it is called a market profit on reselling. It is functionally identical to interest, but is officially not considered interest. Interestingly, banks aren't allowed to charge late fees for this under Islamic law, but as they still remain the legal owners until the entire cost is paid, they can repossess for non-payment. Mudarabah is for companies that want loans, either startups or existing companies that want to expand. The not-a-loan is structured as a joint venture with profit and loss sharing, often with a new holding company. The bank becomes a part-owner of the holding company in a way that entitles the bank to collect profits on the joint venture up to a certain percentage of the original not-a-loan. Again, functionally identical to interest, but officially not. It is worth noting that conservative Islamic clerics have raised objections over these, but have been overruled everywhere that money rules.
  - 4y ago
antibasilisk 4y ago
[flagged]

This destroys the entire economy, making startups and corporations much harder to run to the point of impossibility. Even in countries run on Sharia law, they still find proxies for interest

ticviking 4y ago

Those proxies tend to make the risk and liability much much clearer than usury does. And generally speaking you can’t honestly use those proxies to build financial skyhooks

brutusborn 4y ago
Whats a "financial skyhook"?
- richk449 4y ago
  And where do I get one?

njarboe 4y ago

VCs generally fund startups by giving them funds in exchange for equity, not loans (complicated financial shenanigans aside).

FormerBandmate 4y ago
They use discounted cash flows to model them, which are dependent on loans as a key component. VCs also use loans themselves from time to time, and their investors can use loans to invest in them.
- jongjong 4y ago
  Loans by modern banks rely on the issuance of new currency; it's a scheme which relies on diluting the value of citizens' existing currency. It's unethical; it's stealing from the many to enrich the few who will receive the credit once it's spent into the economy (going into friends' businesses). Kind of like how Carl Icahn sat on the Hertz board, made Hertz take out a huge loan, used the credit to award a huge contract to one of his other businesses and then let Hertz go bankrupt. Citizens footed some of the bill by having their savings and salaries diluted (since Carl kept the proceeds of the loan and spent it into the economy; contributing towards inflation) and of course Hertz shareholders footed most of the bill. It's just theft.
  - sanderjd 4y ago
    This is so misguided. Just raising interest rates by a few points has resulted in many thousands of people losing their livelihoods in under a year, because companies could no longer justify taking out loans. What you're suggesting is eliminating loans altogether. This is a fun dorm room thought experiment, but it's not even hyperbolic to say that if it were actually pursued, it would result in a huge number of deaths by starvation.
    - brutusborn 4y ago
      Modern Islamic countries without usury manage to feed their citizens so although I would agree that banning loans would cause a lot of pain in the modern economy, I can't see how it would cause mass starvation.
      - jongjong 4y ago
        Exactly, and even in those cases, it only serves to enrich certain people who intermediate the loans and to satiate reckless or impatient consumers. It's more like gambling; it appeals to and takes advantage of human nature but doesn't benefit the individual; it only benefits the house. It doesn't actually provide any true value to society.
        sanderjd 4y ago
        This is nonsense. We're rich. Broadly.
        brutusborn 4y ago
        I disagree, loans can benefit both parties if they are well regulated. In these cases loans provide a lot of value for society. Reckless loans are a symptom of an under regulated system (or in the case of the GFC, a combination of under regulation and no effective enforcement).
      - sanderjd 4y ago
        Your "countries with Sharia law are good" argument might not be as compelling to me as you seem to think it is... Are there any good examples of non-authoritarian non-dictatorships in this space? Edit to add: You're right, I guess, that our government would probably take over everything and narrowly dodge mass starvation with mere mass poverty, but that doesn't sound great to me either. And mass starvation isn't so far fetched either, there have been multiple such occurrences globally within the last century.

hackernewds 4y ago

curious what are these proxies? I thought under Sharia law charging interest is "illegal"

zht 4y ago
bank buys the house and you rent-to-own it. coincidentally the total amount of the rent is higher than what the bank bought it for. not "interest", but yea, pretty much interest
- s1artibartfast 4y ago
  Basically identical to a mortgage where the bank has a lien on the house if you stop paying
humanistbot 4y ago
Different mechanisms, but the most common for financing large purchases is Murabaha, which exists in the West as rent-to-own. Islamic law allows merchants to mark-up prices, to buy low and sell high, and nothing is considered wrong with that. So after a conversation at the bank, the bank buys the desired property at market value, marks up the price in a way that just so happens to be the prevailing interest rate (some literally use LIBOR+X), and lets the clients pay over time. The mark-up is not called interest, it is called a market profit on reselling. It is functionally identical to interest, but is officially not considered interest. Interestingly, banks aren't allowed to charge late fees for this under Islamic law, but as they still remain the legal owners until the entire cost is paid, they can repossess for non-payment. Mudarabah is for companies that want loans, either startups or existing companies that want to expand. The not-a-loan is structured as a joint venture with profit and loss sharing, often with a new holding company. The bank becomes a part-owner of the holding company in a way that entitles the bank to collect profits on the joint venture up to a certain percentage of the original not-a-loan. Again, functionally identical to interest, but officially not. It is worth noting that conservative Islamic clerics have raised objections over these, but have been overruled everywhere that money rules.
- 4y ago

antibasilisk 4y ago

[flagged]